The US Commerce Department issued final national security guardrails for the CHIPS for America incentives program on Friday.
Under the guardrails, companies receiving CHIPS funds will be prohibited from expanding material semiconductor manufacturing in countries of concern for 10 years and will be restricted from certain types of joint research or licensing efforts with countries of concern. Those countries of concern currently include China, Russia, Iran and North Korea.
“These guardrails will protect our national security and help the US stay ahead for decades to come,” Commerce Secretary Gina Raimondo said in a statement.
The CHIPS Program Office is expected to give out $39 billion in grants and $75 billion in loans and loan guarantees.
Commerce removed a curb initially proposed that would have defined significant transactions at more than $100,000 and will now define “significant” as it weighs awards to individual companies rather than through rule-making. Groups that fought for the removal included the Information Technology Industry Council that represents TSMC, Intel, Samsung and others.
Commerce also expanded the rule to limit the buildout of chipmakers’ facilities in China. Material expansion is defined as increasing production capacity by more than 5%.
The rule also classifies a list of semiconductors as critical to national security. These include current generation and mature node chips used in quantum computing, radiation-intensive environments and in other specialized military capabilities.
Jack Gold, an analyst at J. Gold Associates, said the rules attempt to “tighten the screws on Chinese investment while also trying to walk a fine line working with our allies such as South Korea, Japan, India, UK and others.” Gold added that some potential CHIPS award recipients “may have wanted to have a wider ability to spend as they see fit.”
Those potential recipients could include Intel, which receives significant revenues from sales into China and operates factories there. Intel declined comment on the rule.
Gold and Leonard Lee, an analyst at neXt Curve, said the rule was expected. However, Lee said a question remains about the latitude TSMC and Samsung have to mitigate commercial restraints on their sizeable trade and business with China and in China.
Also, a variety of US companies depend heavily on China and it is not clear how Beijing will respond to the intent of the CHIPS Act, Lee said. “The majority of the global tech trade and supply chain still goes through China,” he said. “This fact is something that won’t change anytime soon and should not be dismissed in the chip trade calculus.”